Giancarlo Corsetti, Gernot Müller The design of public budget constraints and the effects of austerity policies are salient topics for both policymakers and scholars. The main goal of this literature is to understand whether and how fiscal adjustment can improve the sustainability of welfare systems (Alesina and Perotti 1996, Corsetti 2012, Born et al. 2015). Overall, previous studies find mixed effects on budget constraints in terms of deficit and public debt reduction (Asatryan et al. 2015, Grembi et al. 2016, Coviello et al. 2017, Heinemann et al. 2018). Recent studies have also focused on the adverse political effects of austerity policies (Stiglitz 2016, Fetzer 2019). In a recent paper (Daniele and Giommoni 2020), we study the impact of fiscal austerity on corruption in the context of Italian municipalities. We find that these budget rules, the Domestic Stability Pact, has led to a reduction in corruption, driven by lower discretionary spending.